OVERLOADED MINING COMPANIES.

Southern Cross, Volume 2, Issue 39, 22 December 1894, Page 5

OVERLOADED MINING COMPANIES.

(to the editor}. Sib,— Some months ago I published a long letter in your columns in reference to this subject. It was considered of sufficient public importance to be reprinted in the IST. Z. Finance Journal. In looking over this paper for the current month I find there is an article in reference to the matter of overloaded companies in Western Australia. It is stated that 20 companies have been floated on the London market aggregating a capital of £1,722,000. Of this sum no less than £1,289,000 has been absorbed by owners, promoters, etc., leaving a balance of only £433,000 for the development of the mines ; in order words, only about one-fourth of the capital is available for working’, erection of machinery, etc. How people come to put their money in such companies is a mystery to me, as a 40 per cent, dividend would have to be paid by the company before the legitimate investor could obtain a return of 10 per cent, on his outlay ; or, in other words, the promoter would receive a four times larger dividend than the investor. With the prospect of development of the Wilson’s River mines there is need for extreme caution on the part of the public to see that companies are not so overloaded in the first instance as to preclude all prospect of satisfactory dividends to investors. Money for investment is plentiful and bank rates are low. If raining enterprises could only be carried on in a legitimate manner there might be some prospect of the many thousands of pounds that are at present locked up in our banks being utilised in developing our mineral resources. History, however, repeats itself, so that it is not unlikely we may have a repetition of what has occurred at Nenthorn and of what is evidently now gmng on in Western Australia, unless the whole system of promoters’ shares is carefully kept in check by timely warnings through the press. — I am, etc., Pro Boko Publico.